As a supply chain manager, it is important to understand the value of the various products and materials you purchase for your company. The Kraljic matrix is a useful tool to gain this insight. Developed by Peter Kraljic, the matrix enables you to tailor the purchasing strategy for each product or material to the value it brings to your company. In this blog post I will explain how you can use the Kraljic matrix in your daily work as a supply chain manager.
The Kraljic matrix consists of four categories: strategically important items, inventory-sensitive items, reflowable items and non-essential items.
- Strategically important articles: These are articles that have a large share in the turnover or profit of your company. These items require extra attention and a specific purchasing strategy.
- Bottleneck articles. Stock-sensitive items: these are items whose stock control is crucial for the continuity of your business. Think, for example, of products that sell quickly or products whose stock is limited.
- Leveraged items: these are items where the purchase costs make up a large part of the total cost of the product. You need to conduct proper price negotiations for this
- Routine articles: these are articles that are not of great importance for the continuity of your company. You can usually use a standard purchasing strategy for this.
As a supply chain manager, you can use the Kraljic matrix to align your purchasing strategy for each product or material with the value it brings to your company. This helps you to use your time and resources efficiently and to ensure that you always have the right products in stock.
It is important to note that the Kraljic matrix is only a guideline, each company may have different factors to consider. The matrix can also be periodically updated based on the changed situation in the market, the internal situation or other factors.
In short, the Kraljic matrix is a useful tool for supply chain managers to gain insight into the value of the products and materials they purchase for their company. By using the matrix, they can align their purchasing strategy with the value of the product and use their time and resources more efficiently. It is important to realize that the matrix is only a guideline and that other factors within the context of the company must be taken into account.
There are several ways in which a supply chain manager can practically apply the Kraljic matrix:
- Make an inventory of the products and materials your company purchases. List these products and categorize them into the four categories of the Kraljic matrix (strategically important items, inventory sensitive items, leverage items, and non-essential items).
- Create a purchasing strategy for each category. For example, for strategically important items, extra attention may need to be paid to price negotiations, while for non-essential items, a standard purchasing strategy will suffice.
- Evaluation of suppliers. Determine which suppliers are the best fit for each category. This may mean that for strategically important items you only want to work with a limited number of reliable suppliers with whom you have a long-term relationship.
- Monitoring purchasing performance. Keeps a close eye on the performance of suppliers and products and adjusts the purchasing strategy where necessary.
- Communicate the matrix and associated strategies internally. Make sure that everyone involved in the company is aware of the matrix and the associated purchasing strategies, so that everyone is on the same page.
It is also important to emphasize that the Kraljic matrix is a dynamic tool, and it is important to periodically evaluate and update it as necessary, as internal and external factors change. For example, a supply chain manager can ensure that the purchasing strategy is in line with the current situation of the company and the market, thus optimizing the company’s results.
